Life offices and asset managers represented by the Association for Savings and Investment South Africa (Asisa) have collectively made progress towards achieving the transformation targets set by the amended Financial Sector Code (FSC), although more needs to be done, says Leon Campher, Asisa’s outgoing chief executive.
Campher was speaking at the release of a report a report titled “The journey towards transformation of South Africa’s savings and investment Industry (2018 – 2020) as represented by Asisa”.
He said this was the first time that Asisa has been able accurately assess the collective transformation of its members.
The report only presents scorecards for life offices and asset managers, because the collective investment scheme management companies, linked investment service providers and multi-managers included in the Asisa member base are owned by life insurance companies and asset managers.
The report was compiled by an independent research partnership from broad-based black economic empowerment (B-BBEE) data directly from Asisa-member verification agencies. The data weighting methodology was confirmed by independent actuaries to ensure accurate averages.
The amended FSC, which came into effect on 1 December 2017, is the only framework against which the transformation of the financial sector is measured, with elements and targets agreed upon by the constituents of the Financial Sector Transformation Council (FSTC).
Collective scorecard results
According to Campher, the report shows that in 2020 life offices and asset managers exceeded most of the targets for elements measured by the amended FSC Scorecard. Targets were not met for the following elements: management control, employment equity and skills development.
He said that two additional elements apply only to life offices: empowerment financing and access to financial services. Although life offices have consistently met their 15-point empowerment financing targets between 2018 and 2020, they have not yet collectively achieved full points for the access to financial services element.
Campher said the most significant progress was recorded for the ownership element of the B-BBEE Scorecard, which measures the extent to which black people own equity in a company.
“There has been a steady increase in black ownership of both life offices and asset managers since 2018, with life offices collectively having exceeded their 23-point target by 2.37 points in 2020 and asset managers their 25-point target by one point.”
Campher said substantial progress was also achieved for procurement (the extent to which Asisa members procure goods and services from suppliers with valid B-BBEE certificates).
“Both life offices and asset managers exceeded their procurement targets in 2020. The combined procurement spend with suppliers with valid B-BBEE certificates in 2020 amounted to R52 billion, which is material. It is encouraging that R22bn of this spend went to majority black-owned businesses.”
Life offices and asset managers also exceeded their targets for enterprise and supplier development (ESD), Campher said.
“The aim of ESD is to create sustainable small and medium enterprises, which, in turn, leads to job creation and economic growth. In 2020, the total spend by life offices and asset managers amounted to R749 million.”
The importance of a collective scorecard
Campher said it was important that Asisa members have access to transformation progress reports that are specific to life offices and asset managers.
Although the FSTC tracks the transformation of South Africa’s financial sector as a whole, the FSTC reporting does not take into consideration features unique to the seven different reporting industries, of which the savings and investment industry is one.
Therefore, in 2021, Asisa embarked on a project to monitor the collective transformation progress of its members as measured against the framework of the amended FSC.
Campher said the significance of the report is that it enables member companies to use the industry-weighted averages achieved for each element of the amended FSC as a yardstick against which to measure their individual progress and take corrective action where necessary.
“For the first time, we are able to measure the transformation of our industry, while at the same time focusing our collaborative initiatives on addressing our industry’s most critical transformation shortcomings,” Campher said. “While it is pleasing to see that we are well on our way, we must also acknowledge that we are not quite there yet.”
Furthermore, says Campher, it must also be acknowledged that despite all that has been done to date, South Africa remains a very unequal society.
“It is therefore imperative that our industry continues to play its role in helping our country accelerate the rate of change,” he said.
Asisa’s new chief executive, Busisa Jiya, said ensuring that the industry’s transformation initiatives maintain their momentum was at the top of his list of priorities.
“As an industry, we are acutely aware that we do not operate in a vacuum and that the sustainability of the savings and investment industry is impacted by the well-being of the country and its people. Asisa’s mission is therefore to promote a culture of savings and investment in South Africa by contributing to economic transformation and inclusion.”
Jiya said the transformation of Asisa’s members will be measured annually, and data gathering for the 2021 report was under way.
